Gold has stood the test of time as its demand spans civilizations and conflicts. It is an ideal medium of exchange that protects investors from inflation and has the potential to beat inflation. S&P 500 Index during periods of economic uncertainty.
The upcoming presidential election brings even more uncertainty, which has contributed to gold’s rise of more than 30% since the start of the year. As the Democratic nominee, Vice President Kamala Harris is vying to take over the White House after Biden.
But before you cast your votes, gold investors may want to know how precious metals performed under previous Democratic presidencies.
How gold performed during Biden’s presidency
Harris has been at Biden’s side for four years now, and while it’s possible the vice president could take different approaches to policy if she wins the election, the Biden administration’s track record could – for now – serve as an indicator of how the duo has influenced on gold prices during the presidential administration.
Despite rising prices in 2024, gold has underperformed for most of Biden’s presidency. The physical asset lost 3.73% in 2021 and gained 2.08% in 2022 before rising 13.14% in 2023. Although gold got off to a slow start under the Biden administration, the asset’s big year-to-date gains have so far outpaced its gains. 2020 is the best year for gold during the Trump presidency.
Democrats have historically been tied to significant government spending packages. Policies such as the Inflation Relief Act, while effective in lowering consumer prices, pumped money into the economy and caused gold prices to rise. However, the greatest impact on gold prices during the Biden administration has been the monetary policy of the Federal Reserve.
The Fed raised interest rates to an all-time high in 2022, dampening gains in gold and other precious metals. This is because gold has historically had an inverse relationship with interest rates: when rates rise, gold prices tend to fall.
Central bank meetings were must-watch events for many investors as they tried to read the tea leaves after each speech from Fed Chairman Powell. The large increase in gold prices since the beginning of the year coincided with Fed rate cut. Lower interest rates have driven gold prices to record highs, and with further rate cuts expected, analysts suggest the gold rally could extend into 2025.
How other Democratic presidents affected gold prices
The three Democratic presidents who preceded the Biden administration were Barack Obama, Bill Clinton and Jimmy Carter. Obama’s presidency was one of the best years for gold, in part because the administration began during the worst of the Great Recession. Gold rose 25.04% in 2009 and gained another 30.60% in 2010.
However, gold performed poorly during Obama’s second term between 2013 and 2015, with double-digit declines in two of those three years. Part of this can be explained by the fact that the economy had low interest rates, which set the stage for long-term growth in stocks.
Precious metals did not fare so well during Clinton’s presidency. While gold started out strong, rising 17.64% in 1993, the precious metal never rose more than 2% in any of Clinton’s remaining years in the Oval Office. Notably, gold fell 22.21% in 1997 despite fast growing economy.
Gold performed better during the Carter administration, which can be attributed to high inflation and resulting high interest rates. Gold rose 20.43% in 1977, which was Carter’s “worst” year. Then in 1979, with inflation reaching 11.35% and interest rates reaching 11.70% by the fourth quarter, the price of gold more than doubled.
What affects the price of gold
Inflation, interest rates and geopolitical uncertainty are the three main forces influencing gold prices. Gold tends to rise in price as inflation rises. Inflation reduces purchasing power paper currencieswhich investors use to buy gold.
Low interest rates make fiat currencies more affordable, leading to higher inflation. This is why economic cycles with low interest rates tend to be more favorable for gold. However, rising interest rates reduce the amount of cash in circulation, which has a negative impact on gold prices.
Economic and geopolitical uncertainty also play a role in the price of gold. Economic cycles with greater uncertainty tend to benefit gold investors. Investors tend to put their money into relatively safe assets when the outlook is less certain. Gold can still provide positive returns with less uncertainty as long as interest rates are low or inflation is high.
How a potential Harris presidency in 2025 could affect gold prices
A potential Harris presidency in 2025 could be beneficial for the price of gold if the candidate achieves the results outlined in her official campaign website.
According to her platform, the vice president seeks to “cut taxes for more than 100 million working and middle-class Americans while lowering the costs of everyday needs such as health care, housing and food.”
Each of its policies involves increasing government spending, which could lead to higher inflation. This is good for gold. Additionally, the Fed’s decision to continue cutting interest rates could also boost asset prices, as we already saw in the second half of 2024. Lower interest rates encourage more businesses and consumers to borrow money, which gradually reduces the purchasing power of bonds. US dollar.
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